David M. Kaufman of David M. Kaufman P.C., Santa Fe, New Mexico, for
Plaintiff-Appellant.

Margaret Caffey-Moquin, Associate General Counsel (James C. Martin, General
Counsel, with her on the brief), Santa Fe, New Mexico, for Defendants-Appellees
New Mexico Public Regulation Commission and its Commissioners.

This case arose pursuant to the Telecommunications Act of 1996 (the
"Act"), codified at 47 U.S.C. § 151, et seq. The district court's opinion
provides
a good history of the telecommunications industry and a detailed description of
the instant dispute which will not be repeated at length here. The relevant facts
are as follows.

In 1996, Appellant e.spire Communications, Inc.'s predecessor, American
Communications Services, Inc., ("ACSI"), requested interconnection, service,
and unbundled network elements from U.S. West, Appellee Qwest's predecessor.
When the parties were unable to negotiate all of the terms of the Interconnection
Agreement ("IA"), ACSI petitioned the New Mexico State Corporation
Commission ("NMSCC"), Appellee New Mexico Public Regulation
Commission's ("NMPRC") predecessor, to arbitrate the unresolved issues.

On December 6, 1996, NMSCC issued its findings of fact and conclusions
of law on the arbitration. At paragraph 80, NMSCC stated that "[t]he prices
established in this arbitration are interim prices and will be in effect pending
completion of the Commission's costing docket." Aplt. App., Vol. III, at C43.
On March 3, 1997, NMSCC issued an order resolving a motion for clarification
filed by the parties and ordered the parties to prepare and file an IA consistent
with the Arbitration Order. ACSI and U.S. West filed the IA on March 10, 1997,
which NMSCC approved on April 9, 1997. The IA set the call termination rate at
.0029585 per Minute of Use ("MOU") for large metropolitan areas but did not
specifically state whether the rate was permanent or interim.

On March 17, 1998, ACSI filed a complaint with NMPRC, f/k/a NMSCC,
alleging that U.S. West had failed to pay reciprocal compensation to ACSI for
terminated calls to Internet Service Providers ("ISPs") pursuant to the IA at the
IA approved rate of .0029585 per MOU. U.S. West asserted that it was not
obligated to pay reciprocal compensation and, in the alternative, that, if it was so
obligated, any payment should be at the rate established by NMPRC in its Cost
Docket Order(1) (.0011083 per MOU) because
the IA rates were interim. NMPRC
agreed with ACSI that reciprocal compensation was required but stated that the
rates in the IA were interim. Since the Cost Docket rate was established in
August 1998, NMPRC decided that the lower rate established in the Cost Docket
Order applied to minutes terminated during and after September 1998. The Final
Order was entered on March 5, 2002.

e.spire, f/k/a ACSI, filed the current complaint in the district court on
May 2, 2002, seeking review of NMPRC's Final Order pursuant to 47 U.S.C.
§ 252(e)(6) and 28 U.S.C. § 1331. e.spire alleged that NMPRC violated the
Act
by failing to enforce the unambiguous language of the IA which allegedly set
permanent rates for call termination. e.spire further claimed that its equal
protection and due process rights were violated and that its property had been
taken without payment of just compensation. e.spire also asserted a claim for
damages against NMPRC pursuant to 42 U.S.C. § 1983 for deprivation of "rights,
privileges and immunities secured to it under the Due Process Clause and the
Equal Protection Clause of the United States Constitution." Aplt. App., Vol. I, at
A66.

The district court agreed with NMPRC and Qwest, f/k/a U.S. West, and
affirmed NMPRC's Final Order in the underlying administrative complaint
proceeding. The district court also granted partial summary judgment dismissing
e.spire's causes of action for deprivation of due process, equal protection,
unlawful taking, and damages pursuant to 42 U.S.C. § 1983. e.spire appeals to
this court.

The issues on appeal are 1) whether the district court correctly decided that
NMPRC was not arbitrary and capricious in exercising its continuing jurisdiction
to interpret and enforce the IA between e.spire and Qwest; 2) whether the district
court was correct in granting summary judgment to Appellees on e.spire's
constitutional and 42 U.S.C. § 1983 claims; and 3) whether the district court was
correct in denying e.spire's request for leave to amend its amended complaint to
include a claim for impairment of contract.

We review de novo the district court's grant of summary judgment
applying the same legal standards as the district court. Ahrens v. Ford Motor
Co., 340 F.3d 1142, 1145 (10th Cir. 2003); Steele v. Thiokol Corp., 241 F.3d
1248, 1252 (10th Cir. 2001). We review de novo whether the state commission
properly interpreted and applied the Act and its regulations. Southwestern Bell
Tel. Co. v. Apple, 309 F.3d 713, 717 (10th Cir. 2002). Once we determine that
the state commission properly interpreted the Act and its regulations, we apply an
arbitrary and capricious standard to review the commission's application of that
law to the facts of the case. Id.

The parties agree that they are bound by a partially negotiated, partially
arbitrated IA. The crux of the dispute is whether a specific term­the call
termination rate for calls to ISPs­was arbitrated or negotiated. e.spire contends
that the rate was negotiated while Appellees argue that the rate was arbitrated.
e.spire further argues that NMPRC incorrectly interpreted the IA and decided that
the (allegedly negotiated) call termination rate set forth therein was interim
instead of permanent. Because this query involves determinations of fact and
because there is no meritorious argument that NMPRC incorrectly interpreted and
applied the Act itself, we apply an arbitrary and capricious standard of review.
Seeid. Therefore, the specific question on appeal is whether NMPRC was
arbitrary and capricious in its factual findings and resultant interpretation of the
IA. Based on this deferential standard of review and the record on appeal, we
hold that NMPRC was not arbitrary and capricious in its determination that the
rate set forth in the IA was interim.

Section 252 of the Act expressly gives state commissions the authority to
approve or reject interconnection agreements, but it does not specifically address
the interpretation and enforcement of interconnection agreements after their
initial approval. See 47 U.S.C. §§ 252(a)(2), (b)(1), (e)(1). However,
"[t]his
grant to the state commissions to approve or reject and mediate or arbitrate
interconnection agreements necessarily implies the authority to interpret and
enforce specific provisions contained in those agreements." Southwestern Bell
Tel. Co. v. Brooks Fiber Communications of Okla., Inc., 235 F.3d 493, 497 (10th
Cir. 2000); seealsoBellSouth Telecomm., Inc. v. MCIMetro Access
Transmission Servs., Inc., 317 F.3d 1270, 1274 (11th Cir. 2003). The Act gives
state commissions the power to arbitrate contested terms. Accordingly, NMPRC
had the inherent authority to interpret and enforce the IA that it had previously
approved.

We agree with the district court that "[t]he Interconnection Agreement did
not arise in a vacuum; it was but one step in a complex and on-going regulatory
process." Aplt. App., Vol I., at A37 (E.spire v. Baca, 269 F. Supp. 2d. 1310,
1329 (D.N.M. 2003)). An interconnection agreement is not an ordinary private
contract. It is a document resulting from arbitration authorized and required by
federal law which cannot be viewed in isolation. An interconnection agreement
is not to be construed as a traditional contract but as an instrument arising within
the context of ongoing federal and state regulation. Verizon Maryland, Inc. v.
RCN Telecom Servs., Inc., 232 F. Supp. 2d 539, 552 n.5 (D. Md. 2002) ("[A]n
interconnection agreement is part and parcel of the federal regulatory scheme and
bears no resemblance to an ordinary, run-of-the-mill private contract."). It is
counterintuitive to require a state commission to interpret such a document
without the benefit of the circumstances giving rise to the agreement.

e.spire asserts that NMPRC did not merely interpret the IA; instead, it
modified the IA's terms. e.spire's argument is basically that NMPRC ignored the
plain unambiguous language of the IA and improperly modified the IA to reflect
its interpretation of extrinsic evidence. This attempt by e.spire to characterize
NMPRC's ruling as a modification of the IA instead of an interpretation is
mistaken. NMPRC did not attempt to modify the IA. Instead, NMPRC construed
the IA as consistent with its own Arbitration Order which specified the terms
which were arbitrated. NMPRC gave effect to all of the IA's terms within the
intent of all of NMPRC's prior orders. The prior orders are part and parcel of the
IA, and the IA cannot be severed from the circumstances that gave rise to it.

The IA, the Arbitration Order, and the other documents that were before
NMPRC involving the ISP call termination rate are not a model of clarity.
NMPRC, acting in its unique area of expertise, sifted through these documents
and other evidence and made a determination that the IA call termination rate for
ISPs was 1) arbitrated, not negotiated, and 2) intended to be interim in effect
until the Cost Docket rate was established. At the heart of these determinations
were a string of factual findings in support of this conclusion.

NMPRC first found that e.spire had brought the rate-setting issue before
the NMPRC for arbitration which NMPRC resolved by arbitration. Aplt. App.,
Vol. III, at 158-59, 187; Aplt. App., Vol. I., at A36 (E.spire v. Baca, 269 F.
Supp. 2d. 1310, 1328 (D.N.M. 2003) ("A de novo review of the record and
actions of the NMPRC establishes that e.spire brought the rate-setting issue
before the NMPRC for arbitration and that the NMPRC resolved this issue by
arbitration.")). In support of this factual finding, NMPRC noted that e.spire's
Petition for Arbitration showed that it asked for the arbitration of "issues
concerning compensation for the transport and termination of traffic exchanged
between the parties." Aplt. App., Vol. IV, at D84-85, 87. The Hearing Examiner
noted that the Arbitration Order stated that e.spire's post- (arbitration) hearing
brief "made it clear that the Commission needed to conduct an investigation into
cost/price issues, and that there was no prior negotiated agreement on a specific
termination rate." Aplt. App., Vol. III, at 187-88. The above record support
belies e.spire's argument that the rates were negotiated and set before arbitration
commenced.

NMPRC's second finding was that the IA call termination rate for ISPs
was intended to be interim and only in effect until the Cost Docket rate was
established. In support of this finding, NMPRC noted that the Arbitration Order
directed the parties to set interim rates and told them how to calculate the rates.
Aplt. App., Vol. III, at C50; Vol. I, at A308-11. It noted that, at paragraph 80,
NMSCC had stated that "[t]he prices established in this arbitration are interim
prices and will be in effect pending completion of the Commission's costing
docket." Aplt. App., Vol. III, at C43. The Arbitration Order reserved certain
issues, including the establishment of permanent prices, for resolution in the Cost
Docket proceeding. Seeid. The Cost Docket Order further noted that in a
number of arbitrations, including the U.S. West/ACSI arbitration, the
Commission had "established interim prices for interconnection, unbundled
network elements, transport and termination." Aplt. App., Vol. III, at C93-94. It
then stated that it was establishing "permanent prices for interconnection,
unbundled network elements, and transport and termination." Id. at C94.
Relying on the above record support, NMPRC was not clearly erroneous in
construing the IA to include the costing docket studies referred to in the
Arbitration Order.

e.spire tries to hang its argument on the absence of a footnote in the IA.
Specifically, there is a footnote in the IA which states that the rates for
unbundled loops are interim, but no similar footnote appears on the call
termination rate page. However, NMPRC determined that its placement of
Finding 80 at the end of Section B ("[t]he prices established in this arbitration
are interim prices and will be in effect pending completion of the Commission's
costing docket") was not intended to limit its effect to unbundled loop rates.
Aplt. App., Vol. III, at C43, C159. An additional footnote would have made the
IA more clear. But, the absence of a footnote does not automatically render it
unclear. We are reluctant to hold that the absence of a footnote renders all of the
other record evidence meaningless.The absence of a footnote cannot control
prior relevant language in the agreement. The Arbitration Order expressly set
aside pricing elements in the IA as being interim and subject to the costing
docket. Since by its express terms the Arbitration Order applies to all prices
established in the arbitration, call termination rates must be similarly treated.

NMPRC was authorized to establish prices for call termination and to make
those rates interim. The IA's silence on whether the specific rates were interim
or permanent should not be construed contrary to the intent of NMPRC.
Although the IA does not specify within its four corners that the call termination
rates are interim, it also does not expressly state that they are permanent. It
would be inconsistent with the IA and the circumstances leading up to the
agreement to hold that NMPRC could not construe the IA in a manner consistent
with its own intent because of the lack of a clarifying footnote in the IA itself.

We hold that the rates for call termination were established in the
arbitration and that NMPRC's determination that those rates were interim was not
arbitrary and capricious. We are in no way implying that parties cannot negotiate
agreements. We simply hold that the call termination rate for ISPs in this
particular case was arbitrated, not negotiated.

The district court did not err in its grant of summary judgment to Appellees
on e.spire's constitutional and 42 U.S.C. § 1983 claims. e.spire first argues that
"[t]he imposition of the costing docket rate . . . was arbitrary and capricious
discrimination without rational justification in violation of e.spire's rights to
equal protection and substantive due process under the United States and New
Mexico Constitutions." Aplt. App., Vol. I, at A17. The Equal Protection Clause
provides that "[n]o state shall . . . deny to any person within its jurisdiction the
equal protection of the laws. U.S. Const. amend. XIV, § 1. The New Mexico
Constitution also provides that no "person [shall] be denied equal protection of
the laws." N.M. Const. art. II, § 18. Equal protection of the laws "is essentially
a direction that all persons similarly situated should be treated alike." City of
Cleburne v. Cleburne Living Ctr., 473 U.S. 432, 439 (1985). Since e.spire does
not assert that it is a member of a suspect class or was denied a fundamental
right, the state regulation need only be rationally related to a legitimate
government purpose. Save Palisade Fruit Lands v. Todd, 279 F.3d 1204, 1213
(10th Cir. 2002). Therefore, NMPRC's imposition of the costing docket rate
"need only bear a rational relation to some legitimate end to satisfy the Equal
Protection Clause." Id. at 1213 (quoting Kinnel v. Graves, 265 F.3d 1125,
1128
(10th Cir. 2001) (internal quotations omitted)).

The imposition of the costing docket rate was rationally related to a
legitimate end. The Act requires that state commissions set just and reasonable
rates that are non-discriminatory and cost-based. See 47 U.S.C. § 252(d). e.spire
has failed to demonstrate that the imposition of the costing docket rate was
discriminatory. The rates set were applied across the board to all of the
interconnection agreements which had been arbitrated prior to the Cost Docket
Order. Aplt. App., Vol. III, at C93-94, ¶¶ 13-14. Additionally, the rates were
based on forward-looking cost studies in which e.spire participated. Id.

at C23 ¶
21; Vol. I, at A28. We agree with the district court that "[t]he imposition of
the
rate set by the Costing Docket was rationally related to the legitimate state
interests in setting just and reasonable rates and ensuring greater competition in
the local telephone services market." Aplt. App., Vol. I, at A28.

The district court also did not err in its determination that e.spire's
substantive due process rights were not violated. "The Fourteenth Amendment
proscribes a state from, among other things, depriving a party of 'property
without due process of law.'" Hyde Park Co. v. Santa Fe City Council, 226 F.3d
1207, 1210 (10th Cir. 2000) (quoting U.S. Const. amend. XIV, § 1). The New
Mexico Constitution similarly provides that "[n]o person shall be deprived of
life, liberty, or property without due process of law." N.M. Const. art. II, § 18.
"Property," as it relates to the Due Process Clause, is a "legitimate claim of
entitlement" to some benefit. Board of Regents of State Colleges v. Roth, 408
U.S. 564, 577 (1972). A unilateral expectation that the rate stated in the IA was
permanent does not constitute a protectable property right. SeeHyde Park, 226
F.3d at1210 ("An abstract need for, or unilateral expectation of, a benefit does
not constitute 'property.'"). e.spire did not establish a protectable property
interest and therefore cannot survive rational basis review. Seeid.

Additionally, e.spire's assertion that its due process rights were violated
when NMPRC refused to enforce the terms of the IA is not supported by the
facts. As discussed above, NMPRC did enforce the terms of the IA.It
determined that the rate stated in the IA was interim, only in effect until the
permanent cost docketing rate was established. The replacement of the interim
rate with the permanent rate did not change the terms of the IA.

e.spire's assertion of an unconstitutional taking of property without just
compensation in violation of the Fifth and Fourteenth Amendments and New
Mexico Constitution art. II, §§ 18 and 20(2) must similarly fail.In order to prevail
on a takings claim, e.spire must establish 1) that it had a protectable property
interest and 2) that the governmental action is a taking without just
compensation. Puerto Rico Tel. Co. v. Telecomm. Regulatory Bd. of Puerto
Rico, 189 F.3d 1, 16 (1st Cir. 1999). e.spire cannot meet the first
requirement
thus rendering the second element moot. A unilateral expectation that the rate
stated in the IA was permanent does not constitute a protectable property right.
e.spire voluntarily submitted the issue of the call termination rate to be
determined by NMPRC in binding arbitration. SeeConnolly v. Pension Benefit
Guarantee Corp., 475 U.S. 211, 227 (1986). Additionally, as discussed above,
the ISP call termination rate that e.spire relied on was interim, not permanent.
e.spire could not have had a protectable property interest in the interim call
termination rate remaining permanent. "e.spire does not have a property right in
[the] application of the interim rate for an indefinite period, [and therefore] it
cannot assert a viable takings claim under the Fifth Amendment." Aplt. App.,
Vol. I, at A30-31 (E.spire v. Baca, 269 F. Supp. 2d. 1310, 1325 (D.N.M. 2003)).

We need not address whether e.spire is entitled to bring a 42 U.S.C. § 1983
claim for damages based on deprivations under the Act because, as discussed
above, none of e.spire's Constitutional claims are viable in this case. Since
e.spire has failed to establish the violation of a federally protected right, the §
1983 cause of action must fail. SeeCrown Point I, LLC v. Intermountain Rural
Elec. Ass'n, 319 F.3d 1211, 1216 (10th Cir. 2003) ("In order to prevail on its 42
U.S.C. § 1983 claim, plaintiff must demonstrate that it suffered a deprivation of a
federally protected right.").

The district court did not abuse its discretion in denying e.spire's request
for leave to amend its amended complaint to include a claim for impairment of
contract. "A court properly may deny a motion for leave to amend as futile when
the proposed amended complaint would be subject to dismissal for any reason,
including that the amendment would not survive a motion for summary
judgment." Bauchman for Bauchman v. West High Sch., 132 F.3d 542, 562
(10th Cir. 1997); seealsoWilson v. American Trans Air, Inc., 874
F.2d 386, 392
(7th Cir. 1989).

We agree with the district court that "NMPRC's modification of the call
termination rate was consistent with the Interconnection Agreement and
authorized by law." Aplt. App., Vol I., at A38 (E.spire v. Baca, 269 F. Supp. 2d.
1310, 1329 (D.N.M. 2003). Therefore, an impairment of contract claim would
not survive a motion to dismiss or for summary judgment.

AFFIRMED.

FOOTNOTESClick footnote number to return to corresponding location in the text.

1.The Cost Docket Order noted that in a
number of arbitrations, including
the U.S. West/ACSI arbitration, the Commission had "established interim prices
for interconnection, unbundled network elements, transport and termination."
Aplt. App., Vol. III, at C93. It then stated that it was establishing "permanent
prices for interconnection, unbundled network elements, and transport and
termination." Id. at C93-94.

2."Private property shall not be taken or
damaged for public use without just
compensation." N.M. Const. art. II, § 20.